Women and Financial Literacy

Managing money in the midst of life's other priorities is no easy task. Women of all ages and backgrounds struggle with the pressure to earn enough, access education, care for a family and plan retirement.

Taking the initiative to educate yourself about complex financial decisions will assist you in achieving your next major goal. Every informed financial decision you make contributes to allowing you to pursue your personal goals with confidence.

Page Contents

    Informed Financial Decisions

    More than 41 percent of the female population struggles financially, according to Wider Opportunities for Women, a nonprofit group dedicated to female empowerment. A slowly recovering economy and persistent wage gap makes it imperative for women to increase their financial knowledge.

    Generally speaking, women earn less, save less, and live longer—but are still responsible for the same living expenses men pay. Overcoming these obstacles demands serious dedication to planning exactly how you will spend your money.

    Learning how to increase earnings and handle the resources at your disposal—including time, money and education—to the fullest potential can help you make the most of paychecks and approach financial choices with confidence.

    More Women Struggle with Financial Literacy

    Low literacy rates dramatically impact the lives of women, demanding they work harder, take more time to pay debts and, sometimes settle for earning less.

    The U.S. Department of Education reports that 3.8 million American adult women possess literacy skills below a “basic” level. The basic level refers to reading, writing and math skills at a third-grade level. This lack of education makes it difficult to understand bank statements, credit card agreements and other financial documents.

    Another literacy study of men and women, conducted by the Global Financial Literacy Excellence Center, asked question related to inflation, interest rates and the stock market. The study revealed 16 percent more men answered financial questions correctly.

    Women lacking competency in financial literacy face serious repercussions, such as taking on large amounts of credit card debt, defaulting on student loans, and experiencing difficulty managing income, taxes and investments.

    Click To Enlarge
    Click To Enlarge

    graph on gender and financial capability among millennials

    The Cost of Education

    Today women have a higher likelihood than men of completing college and graduate school. Unfortunately graduation doesn’t guarantee financial stability. Student loans follow many graduates well into careers, and women face serious obstacles when it comes to debt repayment.

    As women dedicate more of post-college earnings to monthly loan payments than men, they are paying from paychecks that often are significantly smaller than a man’s income. Paying loans from their limited resources leaves less money to save for other financial priorities, like buying a home or building retirement savings.

    Fatima Goss Graves, vice president for education and employment at the National Women’s Law Center, recommends women pursue career options with salaries that will pay off. She points out that there aren’t enough women on the Science, Technology, Engineering and Math (STEM) track. By working in jobs with higher earning potential, women can be better prepared financially.

    Gender and the Wage Gap

    Participation in the work force has unique implications for women. An unfair wage gap and life interruptions can slow career progress and force some women to struggle with basic living expenses.

    When women take breaks from their career for childbirth, raising children and taking care of elderly parents, they often sacrifice the momentum they’ve gained from working in their field. More than 70 percent of mothers are part of the labor force. As this trend continues and more mothers take responsibility as primary breadwinners, the necessity for increasing financial literacy will increase.

    • On average, women are paid less, making an average of 77 cents compared to every dollar made by men.
    • At the same time, more women have joined the labor force — making up 47 percent of workers, compared to 38 percent in 1970.

    Home Ownership and Single Women

    While more single women are becoming homeowners, the long-term burden of paying a mortgage is no easy task. In the 1990s, single women began outpacing single men in home ownership. They outnumber men in the categories of first-time home buyers, repeat home buyers, living alone, owning a home, and in spending half their income on housing, according to the National Association of Realtors. Twice as many millennial women compared to men plan to own homes.

    If you’re spending 15 to 30 years paying a high-interest mortgage, it can make putting aside cash for emergencies and retirement savings difficult.

    Women are often paying higher interest rates on mortgages than men -— an average of 0.4 percent, according to a 2011 study by the Journal of Real Estate Finance and Economics.

    Financial Realities of Divorce

    Nearly half of marriages end in divorce and, in many cases, women encounter financial consequences with higher levels of severity than men. Legal fees, tax liabilities and complications from dividing assets make divorce expensive, and it can take years before financial recovery is possible.

    Unlike other financial matters, divorce is hard to plan for. Emotional stress and household tension accompany the financial burden, and the legal process can take months or years to resolve. The majority of women retain custody of children, and struggle to make ends meet because of the high cost of childcare. Some women without children also find themselves having to adjust to a lower standard of living following divorce.

    These statistics highlight how dramatically divorce threatens financial stability:
    • One in five women falls into poverty because of divorce.
    • Three out of four divorced mothers don’t receive full payment of child support.
    • About one out of every three women who own a home and have children at home lose the house after a divorce.

    Lack of Retirement Planning Priorities

    The Social Security Administration reports that a man reaching 65 today will on average live until age 84.3, and a woman until 86.6. With women having longer lifespans, the amount of savings needed for retirement grows.

    Single women of all types –unmarried, divorced and widowed—from age 44 to 64 are under-prepared for retirement. IRA and 401(k) balances fall short compared to male equivalents. Single and married women tend to focus on priorities other than retirement, like paying for their children’s needs and owning a house.

    One of the worst outcomes of not prioritizing savings is missing opportunities to leverage time in your favor. Money kept in interest-bearing accounts for years can grow into a substantial asset. Employee-offered accounts include tax advantages and sometimes match plans that double savings.

    The wage earning gap also limits available Social Security benefits—a built-in foundation that some senior citizens rely on for retirement expenses. As a result of these trends, fewer resources and a lack of planning, women are more likely to encounter poverty in old age and forced to rely on government programs for living expenses.

    Click To Enlarge
    Click To Enlarge

    graph on gender imbalance in retirement savings

    Changing Your Financial Trajectory

    Improve your financial welfare by making a plan for how you will use your paychecks wisely. The power to make good spending and saving choices is yours.

    You can take action in your changing your financial trajectory right away by starting with these steps:

    Learn your credit scoreYou can get a free annual credit report at AnnualCreditReport.com, which is endorsed by Federal law as the official site for free annual credit reports. Then purchase your actual credit score from one of the three credit bureaus.
    Keep a record of your personal debtBy writing down paid off debts, you can track your progress and celebrate small victories.
    Make a budgetPaying off debt will be easier once you start setting limits for yourself and recognizing the difference between needs and wants.
    Open a savings accountWith a few online banking clicks, you can set up automatic deductions from your direct deposit debit card to an interest-earning savings account.
    Pay overdue billsStop ignoring debt collectors and find out if you can negotiate an affordable payments, rather than racking up more late fees.

    Financial Education Material for Women

    Utilize free resources available online and through local financial programs.

    Check out the following websites to get budget, divorce, savings help and more:
    • The Financial Women’s Association aids women and high school students by building basic banking, budgeting and borrowing skills. Established in 1956, the group of now over 850 members worldwide helps women advance their careers and become leaders.
    • The Women’s Institute for Financial Education is a non-profit organization which began in 1988 and provides guidelines on cost of living, retirement planning, taxes, divorce, widowhood.
    • Women’s Institute for a Secure Retirement (WISER), a nonprofit organization dedicated to increasing long-term financial welfare for women, with a focus on retirement security. The group developed the National Resource Center on Women and Retirement Planning, which has a collection of free resources for basic financial planning. Site visitors can take advantage of guidance regarding divorce planning, estate planning, home ownership and caregiving information.
    • The Financial Literacy Organization for Women and Girls (FLOW) is a charitable organization dedicated to empowering females of all ages to achieve their financial best. It hosts conferences, seminars, workshops and boot camps to assist women in financial independence.

    Page Sources

    1. Council of Economic Advisors. (2014, October). Eleven facts about American families and work. Retrieved from https://s3.amazonaws.com/s3.documentcloud.org/documents/1350164/11familyworkfacts.pdf
    2. Rader, B. (2014, July 8). For Women, student loan debt is an even bigger crisis. Retrieved from http://www.aauw.org/2014/07/08/women-and-student-loan-debt/
    3. Constable, S. (2015, June 14). Women, especially, are failing financial literacy. Retrieved from http://www.wsj.com/articles/women-especially-are-failing-financial-literacy-1434129899
    4. Bloomberg. (2014, July 22). Women make up 85% of all consumer purchases. Retrieved from http://www.bloomberg.com/news/videos/b/9e28517f-8de1-4e59-bcda-ce536aa50bd6
    5. Social Security Administration. Calculators: Life expectancy. Retrieved from http://www.ssa.gov/planners/lifeexpectancy.html
    6. Ross, A. (2014, May). Men, women and retirement by the numbers. Retrieved from http://www.bankrate.com/finance/retirement/men-women-retirement-by-the-numbers.aspx
    7. Hill, C. (2015, April 15). 5 Times women pay more. Retrieved from https://www.dailyworth.com/posts/3461-5-times-things-women-pay-more-for